state of arizona joint committee on capital review · jake corey, jlbc staff, presented the...

STATE OF ARIZONA

Joint Committee on Capital ReviewSTATE HOUSE OFSENATE 1716 WEST ADAMS REPRESENTATIVES

PHOENIX, ARIZONA 85007ROBERT “BOB” BURNS RUSSELL K. PEARCE

CHAIRMAN 2003 PHONE (602) 542-5491 CHAIRMAN 2004TIMOTHY S. BEE ANDY BIGGSJACK A. BROWN FAX (602) 542-1616 TOM BOONEROBERT CANNELL, M.D. EDDIE FARNSWORTHSLADE MEAD http://www.azleg.state.az.us/jlbc.htm PHIL LOPESVICTOR SOLTERO LINDA J. LOPEZJIM WARING JOHN LOREDO

JOINT COMMITTEE ON CAPITAL REVIEWThursday, November 6, 2003

1:30 p.mSenate Appropriations Room 109

MEETING NOTICE

- Call to Order

- Approval of Minutes of September 25, 2003.

- DIRECTOR'S REPORT (if necessary).

1. NORTHERN ARIZONA UNIVERSITY – Consider Approval of Scope, Purpose and Estimated Cost of BondProjects.

2. PINAL COMMUNITY COLLEGE DISTRICT – Review of Revenue Bond Refinancing for Central ArizonaCollege.

3. ARIZONA DEPARTMENT OF MINES AND MINERAL RESOURCES – Consider Recommending PartialRent Exemption.

4. ARIZONA DEPARTMENT OF TRANSPORTATION – Review of FY 2004 Building Renewal AllocationPlan.

5. ARIZONA GAME AND FISH DEPARTMENT –A. Review of FY 2004 Building Renewal Allocation Plan.B. Review of Capital Improvement Projects.

6. ARIZONA EXPOSITION AND STATE FAIR BOARD – Review of FY 2004 Building Renewal AllocationPlan.

7. DEPARTMENT OF CORRECTIONS – Report on Status of 1,400 Bed Private Prison Contract.

The Chairman reserves the right to set the order of the agenda.

10/31/03People with disabilities may request accommodations such as interpreters, alternative formats, or assistance with physical accessibility.Requests for accommodations must be made with 72 hours prior notice. If you require accommodations, please contact the JLBC Officeat (602) 542-5491.

STATE OF ARIZONA




MINUTES OF THE MEETINGJOINT COMMITTEE ON CAPITAL REVIEW

Thursday, September 25, 2003The Chairman called the meeting to order at 1:35 p.m. Thursday, September 25, 2003 in Senate AppropriationsRoom 109 and attendance was as follows:

Members: Representative Pearce, Vice Chairman Senator Burns, ChairmanRepresentative Biggs Senator BeeRepresentative Boone Senator BrownRepresentative Lopes Senator CannellRepresentative Lopez Senator MeadRepresentative Loredo Senator Waring

Absent: Representative Farnsworth Senator Soltero (Excused)

Staff: Richard Stavneak Jan Belisle, SecretaryLorenzo Martinez Jake CoreyTony Vidale Steve GrunigPaul Shannon Bob Hull

Others: Joel Valdez U of A Mark Swenson SenateDebra Thompson MCC Debbie Johnston SenateMichael Hunter ATRA Kim Baker SenateCharles McCarty DEMA Steve Miller ASULynn Goss DEMA Chris Muir GITADick Davis U of ADick Roberts U of AGreg Fahey U of ACharlene Ledett U of ADave Harris NAUDave Lorenz NAUBruce Ringwald ADOAJohn Webster ADOABruce Meyers ADOAJack Jones ADOAJayne Long ADOAJoy Hicks HouseJamie Hogue HouseJack Lundsford MCC

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Senator Burns moved the Committee approve the minutes of August 14, 2003 as presented. The motion carried.

MARICOPA COMMUNITY COLLEGE DISTRICT – Review of Performing Arts Center Bond Project.

Jake Corey, JLBC Staff, presented the Maricopa Community College District request that the Committee reviewthe Performing Arts Center (PAC) bond project. The PAC will be constructed on the Paradise ValleyCommunity College campus. This project was held from the last Committee meeting so that more informationcould be obtained. Mr. Corey said the cost per square foot for building construction is approximately $185 persquare foot as opposed to cost reported at the prior meeting of $328. The total project cost of $328 per squarefoot also included infrastructure costs.

Of the total $8.7 million cost of the project, $7.8 million will be financed with revenue bonds. To pay for thedebt service on the bonds, of the $51 per credit hour that the district charges, it is estimated that $.20 will gotowards the debt service.

JLBC Staff recommends that the district report back to the Committee by December 31, 2003 on efforts toachieve economies of scale in the design of future district PAC’s.

Michael Hunter, Vice-President of the Arizona Tax Research Association (ATRA) stated that ATRA hasmonitored the use of revenue bonding at the Community College level and expressed concerns about its impacton taxpayers to the State Board of Directors of Community Colleges and JCCR. The primary concern has beenthat revenue bonding lacks the voters’ scrutiny on debt obligations that ultimately have a direct impact onproperty taxpayers. Increases in tuition and fees and property taxes are deposited into the colleges General Fund.There is no real distinction between the two major revenue sources as they flow into the colleges General Fund.JCCR should be asking if the request under review is an appropriate use of the college district’s revenue bondingauthority under Title 15, Article 5 “Issuance of Bonds for Revenue Producing Buildings.” An example of arevenue producing building would be a dormitory. The fees derived from students who reside in such a facilitywould be the revenue, which in turn would be used for the debt service on those revenue bonds. As of 1981,“projects” considered “revenue producing” included “student or faculty residence halls, dormitories, dining halls,student union buildings, field houses, and other revenue producing buildings.” In 1988, the statute was expandedto include classroom construction. Revenue bonding authority should not be used as a substitute for the publicdebate that should take place when a government entity undertakes a sizeable capital project. Mr. Hunterprovided a letter to the Committee that included his statements and other comments.

In reply to Senator Mead, Mr. Jack Lundsford, Director of Government Relations Internal Affairs, MaricopaCommunity College stated that the project does fit the statutory definition. This is part of a 5-year master planthat the Governing Board adopted. There was a hearing held on tuition as prescribed in statute. The GoverningBoard reaffirmed this position in a public meeting.

Debra Thompson stated that bond counsel does review the bond issuance.

Representative Pearce moved the Committee give a favorable review to the Performing Arts Center Project atParadise Valley Community College and that the district report back to the Committee by December 31, 2003 onthe feasibility of achieving economies of scale in the design of future district performing arts centers. Themotion carried.

ARIZONA DEPARTMENT OF ADMINISTRATION – Approve Transfer of Miners’ Fund CapitalAppropriation.

Tony Vidale, JLBC Staff, presented the Arizona Department of Administration (ADOA) request to approve thetransfer of $52,500 of remaining funds from the Stair Tower/Life Safety Upgrade project to Building Renewal atthe Arizona Pioneers’ Home in Prescott, Arizona. The transferred monies would be used to refurbish theexisting passenger elevator at the Arizona Pioneers’ Home to meet Arizona Disabilities Act and current life

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safety code requirements. Laws 2002, Chapter 343 appropriated $186,100 from the Miners’ Hospital Fund to beused for Building Renewal at the Pioneers’ Home. Of that amount, ADOA allocated $150,100 for the elevatormodernization. However, when ADOA received the bids , all the bids exceeded the available funding. ADOAestimates the total cost to refurbish the elevator to be $202,600.

There was no discussion on this item.

Representative Pearce moved the Committee approve the transfer of $52,500 from the Stair Tower/Life SafetyUpgrade appropriation to refurbish the existing passenger elevator at the Arizona Pioneers’ Home to meetArizona Disabilities Act and current life safety code requirements. The motion carried.

Review of FY 2004 Building Renewal Allocation Plan.

Paul Shannon, JLBC Staff, presented the Arizona Department of Administration request that the Committeereview the FY 2004 Building Renewal allocation plan of $3,500,000 from the Capital Outlay Stabilization Fund(COSF). The COSF allocation will fund 24 projects within the ADOA Building System. ADOA employed thefollowing priorities for the allocation of FY 2003 Building Renewal monies: 1) Fire and life safety projects, 2)Preservation of assets, and 3) Projects critical to the continued operation of existing programs.


Representative Pearce moved the Committee give a favorable review to the Arizona Department ofAdministration FY 2004 Building Renewal Allocation Plan of $3,500,000 from the Capital Outlay StabilizationFund. The motion carried.

UNIVERSITY OF ARIZONA – Review of University Research Infrastructure Lease-Purchase and HealthSciences Center Bond Projects.

Lorenzo Martinez, JLBC Staff, presented the Arizona State University (ASU) request that the Committee reviewthe Institute for Biomedical Science and Biotechnology Building (IBSB), Medical Research Building (MRB),and Chemistry Building Expansion university research infrastructure projects. These projects will be financedwith the issuance of $187,658,730 in Certificates of Participation (COPs).

ASU also requests review of the Drachman Hall and Infrastructure Improvement projects. These projects will befinanced with a revenue bond issuance of $41,480,620.

Before providing a favorable review, it was recommended that the Committee also stipulate that ASU submitinformation to the Committee if contingency allocations to other project components exceeded the greater of$100,000 or 10% of the reported contingency amount.

Four of the projects listed do allocate $6.3 million for landscaping and parking. Of the $6.3 million,approximately 10-15% is for actual landscaping related to grass, shrubbery, etc. The other components deal withdrainage issues and more involved items such as utility infrastructure, lighting, paving to create pedestrianwalkways, as well as drainage issues which require major excavating and grading to control the water flow in thearea. In total, the projects allocate $691,000 for public art. In the past, the committee has raised concerns aboutallocating funding for public art. Mr. Martinez reviewed the Lease-Purchase/Bond Projects.

Mr. Martinez explained that the university pointed out that they have a concern with the stipulation in therecommendation related to reporting to the Committee any contingencies that change the scope of the project.The concern is that if they come across any emergencies where they have to immediately start expendingmonies, they would need to come before the Committee first. They are requesting that they be allowed to reportemergencies as opposed to having to wait for Committee review. JLBC Staff recommends ASU be required toreport those emergencies immediately so that it can be determined whether it constitutes an emergency and to

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what extent it changes the scope of the project. Staff would then inform ASU and the Committee if they believethe change requires Committee review.

In response to Representative Biggs, Mr. Martinez stated that the Board of Regents guidelines do allowallocations for public art. The art is mainly outdoor art.

In response to Representative Boone, Mr. Martinez stated that each of the projects listed will be using theConstruction Manager at Risk process. Because of the timing of the JCCR review process, the cost estimatesthat are submitted to the Committee are not the guaranteed maximum price amounts. The estimates that havebeen submitted have been developed in conjunction with some outside estimators and programming entities thatdetermine how the facilities will be used and what the requirements are. The cost estimator then looks at theprogramming and develops a cost which then the university compares against the cost estimates they havedeveloped based on their own experiences. Once the guaranteed maximum price is agreed upon, theConstruction Manager at Risk is responsible for bringing in the project at the agreed scope and cost. If theybring it in at a lower price, they receive the profit and if it costs more than the guaranteed maximum price, theyare responsible for the additional cost. Any amount left over between the financed amount and guaranteedmaximum price is typically applied to contingencies for emergencies and debt service payments.

Representative Boone suggested that it may be a good idea that an independent firm be consulted for review ofproject guaranteed maximum price guaranteed maximum price.

Representative Pearce moved the Committee give a favorable review to the Institute for Biomedical Science andBiotechnology Building, Medical Research Building, and Chemistry Building Expansion lease-purchaseuniversity research infrastructure projects, as well as the Drachman Hall and Infrastructure Improvement bondprojects with the following stipulations:

� The University report to the Committee before expenditure of any allocations that exceed the greater of$100,000 or 10% of the reported contingency amount total for add alternates that do not expand the scope ofthe project.

� The University submit for Committee review any allocations that exceed the greater of $100,000 or 10% ofthe reported contingency amount total for add alternates that expand the scope of the project. In case of anemergency, the University may immediately report on the scope and estimated cost of the emergency ratherthan submit the item for review. The JLBC Staff will inform the University if they do not agree with thechange of scope as an emergency.

� A favorable review by the Committee does not constitute endorsement of General Fund appropriations tooffset any tuition collections that may be required for debt service on the repayment of the financing or foroperational costs when the projects are complete. These costs should be considered by the entireLegislature through the budget development process.

The motion carried.

Mr. Stavneak, JLBC Staff clarified that the recommendation of the Committee does not include a provision forthe public art issue.

Greg Fahey, UofA stated that they have not developed a plan for the expenditures for public art. The Board ofRegents allows a certain percentage to be allocated for art.

Representative Biggs made a motion that $691,000 not be allocated for public art.

Representative Lopes asked for clarification on whether the motion was specific to the $691,000 amount orwhether the motion was to not allow any funding for public art.

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Representative Biggs restated the motion to stipulate that no monies be allocated for public art. With a show ofhands: 6 ayes, 6 nayes and 2 not voting, the motion failed.

Representative Biggs asked for a roll call vote on the motion. With a roll call vote of 6 ayes, 6 nays and 2 notvoting. The motion failed.

DEPARTMENT OF EMERGENCY AND MILITARY AFFAIRS – Review of Scope, Purpose andEstimated Cost of Classrooms and Operational Support Building Construction at the Project ChallengeCampus.

Steve Grunig, JLBC Staff, presented the Department of Emergency and Military Affairs (DEMA) request thatthe Committee review its plan to spend $250,000 appropriated from the General Fund to DEMA in FY 2002 forconstruction of classrooms and an operational support building at the Project Challenge campus. The amountwill be combined with $350,000 from a private grant to complete the project.


Representative Pearce moved the Committee give a favorable review of the scope, purpose and estimated cost ofconstruction of an operational and a classroom building at the Project Challenge campus. The stateappropriation of $250,000 for the project will be combined with a $350,000 grant received by the department.The motion carried.

ARIZONA DEPARTMENT OF TRANSPORTATION Review of Scope, Purpose, and Estimated Cost ofAsbestos and Lead Inspections.

Bob Hull, JLBC Staff, presented the Arizona Department of Transportation request that the Committee reviewthe scope, purpose and estimated cost of asbestos and lead inspections. The project was appropriated a total of$1,300,000 from the State Highway Fund, including $700,000 in FY 2002 and $600,000 in FY 2003. Of thetotal amount, $96,600 has already been spent, $950,000 is for the remaining work, and $253,400 is forcontingencies. The estimated expenditures seem reasonable based on the bid price and the projected number ofbuildings, samples and analyses. ADOT did not spend or encumber any of the money in FY 2002 or FY 2003.Statute requires any capital appropriation that remains unused for a full year to revert. In order to save thatappropriation ADOT subsequently recoded asbestos or lead related work from other remodeling projects andcharged it back against these 2 appropriations so they could show that they had some monies expended againstthem. This is contrary to statute in that it bypassed the requirement that the JCCR review capital projects prior tothe release of monies for construction. JLBC Staff recommends a favorable review with the stipulation thatADOT report back to the Committee on corrective measures they have taken to assure that appropriations areproperly tracked and that the requirement of A.R.S. § 41-1252 for JCCR to review capital projects prior to therelease of monies for construction is met.

There was no discussion on this item

Representative Pearce moved the Committee give a favorable review of the scope, purpose and estimated cost tocontract for the testing of ADOT’s building and structures for asbestos and lead-based paint. The Committeealso requests that ADOT report back on corrective measures taken to assure that appropriations are properlytracked and that the requirement of A.R.S. § 41-1252 for the Committee to review capital projects prior to therelease of monies for construction is met. The motion carried.

Report on Executive Summary of Arizona 5-Year Transportation Facilities Construction Program.

Bob Hull, JLBC Staff, presented the Executive Summary 5-year Transportation Facilities Construction Program.The entire plan costs $3.9 billion. Of this amount, $1.6 billion will be spent on 17 major projects. The planaddresses 13 of the 21 most congested highway segments in the state. It is recommended that ADOT provide an

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Executive Summary of its 5-Year Transportation Facilities Construction Program for FY 2005-FY 2009, whenthe department requests Committee review of its FY 2005 highway construction budget for Professional &Outside expenditure plan

There was no discussion on this item and no Committee action was required.

GOVERNMENT INFORMATION TECHNOLOGY AGENCY Report on TelecommunicationsPrivatization.

Paul Shannon, JLBC Staff, presented the Government Information Technology Agency (GITA) report onTelecommunications Privatization. GITA in consultation with ADOA must prepare and submit to the JCCR anactionable request for proposals (RFPs) to privatize the state’s telecommunication services. Both agencies arerequired to submit monthly reports on the status of related activities and expenditures. GITA is preparing theRFP and plans to submit it to JCCR by October 31, 2003 for review.

There was no discussion on this item and no Committee action was required.

OFFICE OF THE ATTORNEY GENERAL Report on Status of 1,400 Bed Private Prison Contract.

Chairman Burns mentioned that he had met with the parties involved and this issue was no longer necessary.

The meeting adjourned at 2:35 p.m.

Jan Belisle, Secretary

Lorenzo Martinez, Assistant Director

Senator Robert “Bob” Burns, Chairman

NOTE: A full tape recording of this meeting is available at the JLBC Staff Office, 1716 W. Adams.

STATE OF ARIZONA




DATE: October 30, 2003

TO: Senator Bob Burns, ChairmanMembers, Joint Committee on Capital Review

THRU: Richard Stavneak, Director

FROM: Lorenzo Martinez, Assistant Director

SUBJECT: NORTHERN ARIZONA UNIVERSITY – CONSIDER APPROVAL OF SCOPE,PURPOSE AND ESTIMATED COST OF BOND PROJECTS

Request

Of a total of $93,900,000 in bonding authority allowed pursuant to Laws 1996, Chapter 334 and Laws2001, Chapter 233, Northern Arizona University (NAU) has $31,300,000 in remaining bonding authority.NAU is requesting Committee approval to exercise $31,000,000 in remaining bonding authority tofinance 5 projects.

Two of these projects, Infrastructure Upgrades and School of Communication Building Renovations,were approved by the Committee in August 2002. The scope or estimated cost of these projects has beenrevised. Phase 2 of the Modular Swing Space is a continuation of a previous project also approved inAugust 2002, and 2 College of Business related projects are new.

Recommendation

The JLBC Staff recommends that the Committee approve the issuance of $31,000,000 in revenue bondsfor the proposed projects with the following stipulations:� NAU report to the Committee before expenditure of any allocations that exceed the greater of

$100,000 or 10% of the reported contingency amount total for add alternates that do not expand thescope of the project.

� NAU submit for Committee review any allocations that exceed the greater of $100,000 or 10% of thereported contingency amount total for add alternates that expand the scope of the project. In case ofan emergency, NAU may immediately report on the scope and estimated cost of the emergency ratherthan submit the item for review. The JLBC Staff will inform the university if they do not agree withthe change of scope as an emergency.

� A favorable review by the Committee does not constitute endorsement of General Fundappropriations for operational costs when the projects are complete. These costs should beconsidered by the entire Legislature through the budget development process.

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As of August 2002, NAU had $63,000,000 of revenue bonding authority remaining. NAU wasappropriated $4,000,000 from the General Fund in its operating budget in FY 2003 to offset the loss ofoperating tuition revenues that would be used to pay the annual debt service when these bonds wereissued. At its August 2002 meeting, the Committee approved the issuance of $31,700,000 for variouscapital projects. The request before the Committee reflects issuing the remaining bonding authority of$31,300,000.

Annual debt service for this issuance is estimated to be $2,039,700. Total interest paid over the 30 yearrepayment period would be $30,191,000. Combined with the required debt service for the issuanceapproved in August 2002, annual debt service will be $4,073,800.

These projects would increase the university’s debt ratio (debt services as a percent of total expenditures)from 4.81% to 5.11%. The statutory cap is 8%.

Analysis

Table 1 lists the estimated capital cost of the projects associated with this $31,000,000 bond issuance, anyamounts previously approved by the Committee and total project cost.

NAU Bond Project Costs

ProjectCurrentRequest

PreviouslyApproved Total

New College of Business $22,000,000 $ 0 $22,000,000College of Business Stabilization 500,000 0 500,000Infrastructure Upgrades 5,000,000 12,725,000 17,725,000 1/

Modular Swing Space 2,600,000 2,625,000 5,225,000School of Communication Renovations 900,000 13,120,000 14,020,000 2/

Unallocated 300,000 0 300,000Total $31,300,000 $28,470,000 $59,770,000

____________1/ NAU estimates total at $17,600,000.2/ NAU estimates total at $13,900,000.

The bonds will be repaid over a 30 year period at an estimated interest rate of 5.1%. Table 2 lists theNAU estimated annual debt service associated with each project as well as the total amount that will bepaid over the 30-year period.

NAU Bond Project Debt Service Costs

Project Annual Debt Service Total PaymentsNew College of Business $1,447,500 $43,425,000College of Business Stabilization 32,900 987,000Infrastructure Upgrades 329,000 9,870,000Modular Swing Space 171,100 5,133,000School of Communication Renovations 59,200 1,776,000

Total $2,039,700 $61,191,000

NAU was appropriated $4 million from the General Fund in FY 2003 to offset the loss of tuitioncollections that will be used to pay the debt service on these bonds (and bonds approved by theCommittee in August 2002). The August 2002 approved issuance of $31,700,000 had an estimatedannual debt payment of $2,034,100 (4.88% over 30 years).

Table 3 lists the estimated operating and maintenance costs for each project associated with this bondissuance after it is completed. NAU will make a General Fund request for these funds when the projectsare completed.

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NAU Bond ProjectOperating & Maintenance Costs

Project EstimateNew College of Business $550,000Modular Swing Space 65,000

Total $615,000

The following provides a description of each of the 5 projects.

New College of Business Building – NAU will construct a new 100,000 square foot facility at anestimated cost of $22,000,000. The new facility will provide state-of-the-art computer labs andclassrooms, seminar and conference rooms, office space, student centered areas, flexible spaces and anauditorium. The facility will house the Accounting, Computer Information Systems, Economics, Finance,and Management and Marking programs and departments. NAU is also seeking $5,000,000 in gift fundsto provide fixtures, furniture and equipment as well as other amenities not directly related to construction.

The existing 71,000 square foot College of Business was constructed in 1972. The mechanical, electricaland plumbing systems are beyond capacity and expected life expectancies. While the building is not asafety hazard, the structural integrity is deteriorating as a result of an unstable foundation (see College ofBusiness Stabilization project). Estimated costs to renovate the facility is over $15,000,000. A generalbuilding renewal rule-of-thumb is to replace a facility if renovation costs exceed two-thirds of thereplacement cost. NAU criteria is to consider replacement if deferred maintenance divided byreplacement cost (facility condition index - FCI) exceeds 60%. An assessment on the College of Businesscalculated the FCI to be over 70%. When the new College of Business building is complete, NAU plansto use the vacated facilities as temporary swing space to house programs and departments while otherbuildings on campus are being renovated.

Taking the total amount allocated for the project and dividing by the total gross square feet (GSF), thetotal project cost per square foot is $220. Taking the costs directly related to constructing the building(excludes contingencies and allocations for ancillary items such as design and surveys) and dividing byGSF, the direct construction cost per square foot is $182. These are 2 of the standard calculationstypically used for cost comparisons with similar projects. As part the standard project developmentprocess, NAU hired an outside firm to corroborate the initial cost estimate developed by the university,architect and construction manager. The estimate will continue to be refined as schematic designs andconstruction documents are developed. A sample of 7 business college projects that have been completednationwide since 2000 had an average construction cost of $175 per square foot. The MediatedClassroom/Social Sciences Building project currently under construction on the Arizona State Universitycampus is estimated to have a construction cost of $182 per square foot.

The project is estimated to take 15 months from the start of construction to completion. Annual on-goingoperating and maintenance costs when the project is complete are estimated to be $550,000. NAU plansto make a General Fund request for these costs when the building is ready for occupancy.

At an estimated interest rate of 5.1% over a 30-year repayment period, the annual debt service on the$22,000,000 is $1,447,500. Total interest paid for this project will be $21,425,000.

College of Business Structural Stabilization – NAU will allocate $500,000 of the bond issuance tostabilize structural deterioration that is occurring to the existing College of Business due to settlement andshifting of the soil and clay on which the facility sits. While there is no immediate structural jeopardy, anassessment on the condition of building recommended replacement and repair of the foundation slab,column capitals, and weld connections to stabilize the deterioration. The building will continue to housethe College of Business while the new facility is constructed, and will house other programs on a

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temporary basis while other buildings on campus are renovated. NAU does not plan on deciding the finaldisposition of the facility for 2-3 years.

At an estimated interest rate of 5.1% over a 30-year repayment period, the annual debt service on the$500,000 is $32,900. Total interest paid for this project will be $487,000.

Infrastructure Upgrades – NAU has revised the scope and estimated cost of infrastructure upgradesapproved by the Committee in August 2002. The estimated cost has increased from $12,725,000 to$17,725,000. The increase of $5,000,000 would be used to eliminate stand alone cooling units in thesouth campus and construct a centralized chiller plant with greater capacity and more efficient operation.The scope of the infrastructure upgrades was revised to include this component in anticipation of futureconstruction related to research infrastructure projects authorized by Laws 2003, Chapter 267 (H.B.2529).

NAU hired an outside firm specializing in the design and construction of infrastructure utility systems tohelp develop and corroborate the cost estimate. The costs associated with the type of building to beconstructed, the size of the chiller units and the linear and square footage associated with the proposedsitework and utility extensions appear reasonable. The projects are estimated to take 14 months from thestart of construction to completion.

At an estimated interest rate of 5.1% over a 30-year repayment period, the annual debt service on the$5,000,000 is $329,000. Total interest paid for this project will be $4,870,000.

Modular Swing Space – This project involves the construction of infrastructure and concrete pads uponwhich modular facilities can be installed as needed by user groups relocated during building renovationsplanned across campus. This second phase of the project will complete development of a 12-acre sitewith 5 concrete pads, facilities to provide utility extensions to the buildings, a service/delivery road, and adrainage, storm sewer and catch basin system. Estimated cost of Phase 2 is $2,600,000. The amountapproved by the Committee for Phase 1 in August 2002 was $2,625,000.

NAU reports that Phase 1 is 99% complete and is currently under budget by $114,000. Phase 2 willinclude the installation of two 10,000 square foot modular buildings with utility connections. The cost forthese buildings is $100 per square foot, which is reasonable for these types of buildings. Based on theactual costs for Phase 1, the costs for additional sitework, utility extensions and paving also appearreasonable. Phase 2 is estimated to take 3-6 months from the start of construction to completion. ThePhase 2 buildings will house the School of Communication and the College of Engineering while thebuildings housing these programs are renovated. Annual on-going operating and maintenance costs whenthe project is complete are estimated to be $65,000. NAU plans to make a General Fund request for thesecosts when the project is complete.

At an estimated interest rate of 5.1% over a 30-year repayment period, the annual debt service on the$2,600,000 is $171,100. Total interest paid for Phase 2 of this project will be $2,533,000.

School of Communication Renovations – NAU has revised the scope and estimated cost of renovations tothe School of Communications building. The Committee approved an allocation of $13,120,000 inAugust 2002. The revision would increase the estimated cost by $900,000. Combined with reallocationsfrom the previously approved amount, the scope of the project will be expanded to include a 30,000square foot expansion to accommodate a lecture hall and classroom space.

The building was constructed in 1960. The previous scope of the project included major repair andupgrade of electrical, mechanical and plumbing system components, reconfiguration and upgrading ofclassroom, laboratory and office space, and addressing code compliance and health and safety issues.

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NAU hired an outside architectural and engineering firm to conduct an assessment of the facility anddevelop schematic designs and cost estimates for the original scope approved by the Committee in August2002. NAU reports the project is 45% complete and on budget based on the revised scope and costestimates. Total project cost per square foot is $154, and direct construction cost per square foot is $131.Compared to the new construction costs for the College of Business and given that this project involvesmajor renovation and new construction that will increase square footage by 48%, the costs appearreasonable.

At an estimated interest rate of 5.1% over a 30-year repayment period, the annual debt service on the$900,000 is $59,200. Total interest paid for this project will be $876,000.

RS/LM:jb

STATE OF ARIZONA







FROM: Jake Corey, Fiscal Analyst

SUBJECT: PINAL COMMUNITY COLLEGE DISTRICT – REVIEW OF REVENUE BONDREFINANCING FOR CENTRAL ARIZONA COLLEGE

Request

Pursuant to A.R.S. § 15-1483, Pinal County Community College District (District) requests Committee reviewof two district projects to be funded by refinancing outstanding revenue bonds and Certificates of Participation(COP’s).

Recommendation

Prior to making a recommendation, the JLBC Staff is seeking information on two items in the request,including 1) the lack of detail on equipment funding, and 2) the cost per square foot of the restroomrenovation.

The District plans to refinance existing revenue bonds and COP’s to generate $5,000,000 in proceeds. Theproceeds will help fund a University Center at Central Arizona College. The total project cost is estimated tobe $6,000,000. The District plans to use $1,500,000 in donations from the Pinal County UniversityFoundation and $4,500,000 in refinancing proceeds to fund the center. Of the total $6,000,000 cost, theDistrict estimates spending $1,000,000 on furniture and equipment. The District has not provided detail on thetype of furniture or equipment that would be purchased.

The remaining $500,000 in refinancing proceeds will be used to make restrooms in the Pence Theater Centercompliant with federal Americans with Disabilities Act (ADA) requirements. The cost per square foot of theproject is $667. The JLBC Staff has requested additional information on the costs of this project.

As part of the refinancing, the District will be extending the term of its debt service payments. Annual debtservice payments will remain at approximately $2.2 million, but the District will extend those annual paymentsby four years. Most of the debt service related to the refinancing, therefore, will be paid in the last four yearsof the new payment term. (See Table in Analysis Section.)

Over a 15-year period, the additional debt service due to the refinancing will equal an estimated $10,916,700.Extending the payment term at the back end has significantly increased debt service costs. The total debtservice costs on a typical 15-year, $5,000,000 issuance would be closer to $7.5 million. Compared to the costsof issuing a new 15-year bond, therefore, the District will be paying approximately $3.5 million in greater debt

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service costs to extend the payment period. The additional debt service related to refinancing will be paid withrental revenues through FY 2015, then with tuition and fees, in addition to rental revenues, through FY 2019.

Analysis

A.R.S. § 15-1483 requires a community college district, prior to the issuance of bonds, to submit informationon any projects to be funded with the bond proceeds to the Committee for review. The Capital Project BudgetSummary submitted by the college details the $6,500,000 total for the two projects.

The University Center will be a 35,000 square foot facility, including sixteen classrooms, two conferencerooms, two labs, two lecture halls, and twelve faculty offices. Proceeds from the refinancing will fund thedesign, construction, furnishings, and equipment of the facility. The total cost of the project is estimated to be$6,000,000, for a total square footage cost of $171. The cost for direct building construction is $3,900,000, fora direct construction cost per square foot of $111. The costs are comparable to other higher educationclassroom construction projects.

Of the $6,000,000 total, $1,000,000 is allocated for furniture and equipment. The District has not specificallyidentified the furniture or equipment to be purchased. The Committee has raised concerns in the past aboutfinancing equipment purchases if the expected useful life of the equipment is significantly shorter than therepayment period. A.R.S. § 15-1481, however, does allow community college districts to use bond financingfor equipment.

Annual operating costs for the center are estimated to be $254,000 and will be funded with rental revenues.The District estimates receiving $460,000 per year in rental revenues from Arizona public universities that willbe using the facility.

The District will also be performing work on the Pence Theater Center to make the restrooms compliant withADA standards. To accomplish this, the District will expand the center by 750 square feet and renovate theexisting restrooms. The total cost of the project is estimated to be $500,000, which equates to $667 per squarefoot.

The table below shows the estimated annual debt service payments. Rental revenues will be used for therefinancing debt service payments through FY 2015. Beginning in FY 2016 and continuing until the finalpayment in FY 2019, the district will use tuition and fees, in addition to rental revenues, to make the debtservice payments. Prior to refinancing, the final payment on the outstanding revenue bonds was to be made inFY 2015. Included in the refinancing is a deferral of the final debt service payment from FY 2015 to FY 2019.The District has likewise extended the time period over which the increase in tuition and fees will be used tofund the total debt service.

Estimated Debt Service ScheduleFY 2004 – FY 2019

Existing Debt Service Refinancing Debt Service Total Debt ServiceFY 2004 $2,029,000 $0 $2,029,000FY 2005 $2,029,300 $194,100 $2,223,400FY 2006 $2,029,400 $186,100 $2,215,500FY 2007 $2,029,000 $189,500 $2,218,500FY 2008 $2,030,500 $186,500 $2,217,000FY 2009 $2,033,800 $185,200 $2,219,100FY 2010 $2,033,600 $182,200 $2,215,900FY 2011 $2,030,900 $186,700 $2,217,600FY 2012 $2,033,000 $185,100 $2,218,100FY 2013 $2,035,000 $183,200 $2,218,300FY 2014 $2,032,300 $186,800 $2,219,000FY 2015 $2,028,400 $186,600 $2,215,100FY 2016 $0 $2,215,800 $2,215,800FY 2017 $0 $2,215,800 $2,215,800FY 2018 $0 $2,215,000 $2,215,000FY 2019 $0 $2,218200 $2,218,200

Total $24,374,200 $10,916,700 $35,290,900

RS/JC:jb

STATE OF ARIZONA







FROM: Bethany Nicholas, Fiscal Analyst

SUBJECT: ARIZONA DEPARTMENT OF MINES AND MINERAL RESOURCES –CONSIDER RECOMMENDING PARTIAL RENT EXEMPTION

Request

The Arizona Department of Mines and Mineral Resources (ADMMR) requests a partial rent exemption inthe amount of $136,400 for FY 2004. Pursuant to A.R.S. § 41-792.01D, “if a state agency does not havethe financial resources for state owned space … the Director of the Arizona Department ofAdministration (ADOA), on recommendation of the Joint Committee on Capital Review, may authorize awhole or partial exemption from payment of the rental fee.”

Recommendation

The Committee has at least three options:

1. Recommend that ADOA authorize a General Fund partial FY 2004 rent exemption of $136,400.2. Recommend a FY 2004 rent exemption of $106,000, the same amount exempted in FY 2003.3. Do not recommend the request. Without an exemption, the department could either A) transfer funds

from Personal Services and Employee Related Expenses (ERE) thereby necessitating a reduction of 3or 4 FTE Positions or B) make a one-time expenditure of funds from the Mines and MineralResources Fund, a non-appropriated fund which receives monies from sales in the museum’s giftshop.

Analysis

In FY 2003 ADMMR requested and was granted a rent exemption in June. At that time the rentrequirement for ADMMR was $368,100, which accounted for 57% of the agency’s operating budget.ADMMR had paid $261,500 in rent to the Arizona Department of Administration and had an outstandingbalance of $106,000. The only funding remaining in the budget was Personal Services and EmployeeRelated Expenditures (ERE). Transferring additional funds to cover the rent charge would have requireda reduction in current staff.

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Option 1 – Recommend the Requested Exemption of $136,100The FY 2004 rent requirement for ADMMR is again $368,100. ADMMR estimates that approximately$231,700 will be available for rent in FY 2004. This includes $222,200 from the budgeted OtherOperating Expenditures (OOE) allocation and $9,500 from the department’s Mines and MineralResources Fund, a non-appropriated fund which receives monies from sales in the museum’s gift shop.

The agency’s total OOE allocation for FY 2004 is $254,300. Approving the requested $136,100 rentexemption would cause the board to pay $222,200 for rent and use the remaining OOE funding of$43,900 for risk management, technology services, office supplies, printing, repairs, training, and postageexpenses. In comparison, the department spent approximately $20,700 on non-rent other operatingexpenses in FY 2003 ($9,200 from the General Fund and $11,500 from the Mines and Mineral ResourcesFund, a non-appropriated fund). As a result, the $136,100 rent exemption would “free-up” more moniesin the base budget and effectively permit other budget increases.

Option 2 – Maintain the FY 2003 Exemption of $106,000Approving a $106,000 rent exemption, which is equivalent to the exemption approved in FY 2003, wouldrequire ADMMR to forego planned increases in Professional and Outside Services, In-State Travel,Equipment, and OOE expenditures.

Option 3 – Deny the Rent ExemptionDenying the rent exemption entirely would require ADMMR to do one of two things. 1) Transfer fundsfrom Personal Services and Employee Related Expenses (ERE) thereby requiring a reduction of between3 and 4 FTE Positions. The agency has 7 appropriated and filled FTE Positions. 2) Transfer some fundsfrom Personal Services and ERE and make a one-time expenditure of funds from the Mines and MineralResources Fund, a non-appropriated fund. The Mines and Mineral Resources Fund does not have anadequate fund balance to sustain a one-time expenditure of the complete amount. The departmentestimates the fund will have a balance of approximately $100,000 at the end of FY 2004.

Laws 2003, Chapter 263 (Public Finances Omnibus Reconciliation Bill) would have exempted ADMMRfrom $205,100 per year in ADOA rent charges for FY 2004 and FY 2005. The Governor, however,vetoed this section of the bill.

RS/BN:ck

STATE OF ARIZONA







FROM: Bob Hull, Principal Research/Fiscal Analyst

SUBJECT: DEPARTMENT OF TRANSPORTATION – REVIEW OF FY 2004 BUILDINGRENEWAL ALLOCATION PLAN

Request

The Arizona Department of Transportation (ADOT) requests that the Committee review its FY 2004Building Renewal allocation plan.

Recommendation

The JLBC Staff recommends a favorable review of the plan. ADOT has allocated $1,363,300 from theState Highway Fund among 87 projects leaving a contingency amount of $197,200, and $32,000 from theState Aviation Fund among 3 projects. The JLBC Staff further recommends that funding for any newprojects not listed in the allocation plan, reallocations between projects, and allocations from thecontingency amount be reported to JLBC Staff prior to expenditure. JLBC Staff would report to theCommittee on significant changes, typically above $50,000. All of the projects fit within the guidelinesfor building renewal projects.

Analysis

Laws 1986, Chapter 85 established the Joint Committee on Capital Review and charged it withdeveloping a Building Renewal Formula to guide the Legislature in appropriating monies for themaintenance and repair of state buildings. Pursuant to A.R.S. § 41-1252, the JCCR shall review theexpenditure of Building Renewal monies.

The Capital Outlay Bill (Laws 2003, Chapter 261) appropriated a total of $1,592,500 to ADOT forbuilding renewal in FY 2004, including $1,560,500 from the State Highway Fund and $32,000 from theState Aviation Fund. The FY 2004 Building Renewal appropriations represent 50% of the amountgenerated by the Building Renewal Formula. ADOT expects to allocate the Building Renewal moniesfrom the State Highway Fund in the following categories for 87 projects:

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Category Projects State Highway Fund % of TotalFire/Life/Safety 15 $ 471,300 30.2%Roofs Repair/Replacement 31 177,400 11.4Exterior Preservation (Doors, Windows, Siding) 14 86,900 5.6Building Systems (HVAC, Electrical, Plumbing) 19 302,200 19.4Interior Finishes (Paint, Carpet, Tile) 2 6,500 0.4Remodel 1 7,000 0.4Americans with Disabilities Act 1 200,000 12.8Infrastructure (Sewers, Parking) 4 112,000 7.2Contingencies 197,200 12.6

Total 87 $1,560,500 100.0%

For the Committee’s information, the following 4 State Highway Fund projects require $50,000 or more:

Project AllocationRepair 2 elevators – MVD 1801 W. Jefferson $ 225,000Replace damaged eyebolts – Spreader Racks Statewide 95,000ADA compliance – Multiple MVD Locations 200,000Replace septic system – Seligman Mobile Homes 65,000

Subtotal $585,000

ADOT expects to allocate the Building Renewal monies from the State Aviation Fund in the followingcategories for 3 projects:

Category Projects State Highway Fund % of TotalRoofs Repair/Replacement 1 $13,500 42.2Interior Finishes (Paint, Carpet, Tile) 2 18,500 57.8

Total 3 $32,000 100.0%

The JLBC Staff recommends a favorable review of the FY 2004 expenditure plan. The attached materialsubmitted by ADOT lists each project and its estimated cost. The projects are consistent with BuildingRenewal guidelines and appropriations.

RS/BH:jb

STATE OF ARIZONA







FROM: Jason Hampton, Fiscal Analyst

SUBJECT: ARIZONA GAME AND FISH DEPARTMENT – REVIEW OF FY 2004 BUILDINGRENEWAL ALLOCATION PLAN

Request

The Arizona Game and Fish Department (AGFD) requests Committee review of its FY 2004 BuildingRenewal allocation plan of $323,000 from the Game and Fish Fund.

Recommendation

The JLBC Staff recommends a favorable review of the plan. The $323,000 plan includes the followingexpenditures:• $43,000 is for Major Building Systems including air conditioning and evaporative cooler

replacement.• $66,000 is for Preservations of Assets including roofing replacement and exterior painting projects.• $89,000 is for Interior Building Finishes including carpeting and flooring replacement, interior

painting, and restroom renovation.• $55,000 is for Infrastructure including paving maintenance.• $70,000 is for Alterations to Occupied Space including office and workspace modifications.

Analysis

Laws 1986, Chapter 85 established the Joint Committee on Capital Review and charged it withdeveloping a Building Renewal Formula to guide the Legislature in appropriating monies for themaintenance and repair of state buildings. A.R.S. § 41-1252 requires JCCR review of the expenditureplan for Building Renewal monies. Laws 2003, Chapter 261 appropriated a total of $323,300 inFY 2004 from the Game and Fish Fund to the AGFD, to fund 100% of the Building Renewal Formula.

(Continued)

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The AGFD has more than 270 structures within its building and infrastructure system across the statetotaling approximately 542,000 square feet. Facilities include central headquarters in Phoenix, sixregional offices, fish hatcheries, and multiple residences and storage buildings. The FY 2004 proposedBuilding Renewal expenditure plan is illustrated in the following table:

Table 1

Category FY 2004 AllocationMajor Building Systems

Air Conditioning & Evaporative Cooler Replacement $43,000Preservation of Assets

Exterior Painting 26,000Roofing 40,000

Interior Building FinishesCarpeting/Flooring 52,000Interior Painting 17,000Restroom Renovation 20,000

InfrastructurePaving Maintenance 55,000

Alterations to Occupied Space*Office/Workspace Modifications 70,000

Total $323,000

* Unspent monies in this category will be applied to other categories as needed.

The funding allocations primarily fund multi-year replacement plans at various locations statewide.The submitted material provides additional detail for each project. The projects are consistent withbuilding renewal guidelines and appropriations.

RS/JH:jb

STATE OF ARIZONA








SUBJECT: ARIZONA GAME AND FISH DEPARTMENT – REVIEW OF CAPITALIMPROVEMENT PROJECTS

Request

The Arizona Game and Fish Department (AGFD) requests Committee review of its capitalimprovement expenditure plans for its security system, Pinetop Regional Office, and Tri-StateShooting Range.

Recommendation

The JLBC Staff recommends that the Committee give a favorable review to the Pinetop RegionalOffice projects. JLBC Staff has requested additional information to confirm the reasonablenessof the security system and shooting range cost estimates and will provide a recommendation tothe Committee at its meeting.

The total cost for the three projects is estimated to be $810,000. These projects are funded fromthe AGFD Capital Improvement Fund.

Analysis

Laws 1986, Chapter 85 established the Joint Committee on Capital Review and charged it withreviewing the state capital improvement plan and expenditures of all monies appropriated forcapital projects and building renewal. A.R.S. § 41-1252 (C) also requires JCCR review of newcapital projects estimated to cost more than $250,000 before release of the monies forconstruction.

(Continued)

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Laws 2003, Chapter 261 appropriated $810,000 from the AGFD Capital Improvement Fund forthe projects listed in the following table:

Table 1

Category Expenditure PlanSecurity System Upgrades

Card Reader System $ 80,000Security Alarm Panels 81,000ID Badges & Proximity Card 8,000South Yard Perimeter Alarm 10,000Panic Alarms 6,000Color Camera Monitoring System 15,000

Pinetop Regional OfficePaving Improvements 50,000Warehouse Construction 260,000

Tri-State Shooting RangeRange Infrastructure Construction 65,000Pistol & Practical Range Construction 165,000Trap, Skeet, & Sporting Clay Range Construction 70,000

Total $810,000

Security System UpgradesThe department will procure the necessary equipment to upgrade and integrate the existingsecurity system at the Deer Valley headquarters location. The new system will includeupgrading security alarm panels and keypads, badge proximity readers, camera monitoringsystem, and the perimeter alarm for the south yard. JLBC Staff has requested additionalinformation to confirm the reasonableness of the cost estimates.

The department had received a total of $1,600,000 in prior appropriations from the CapitalImprovement Fund to renovate and expand the headquarters location. However, at thedepartment’s request, Laws 2003, Chapter 261 (FY 2004 Capital Outlay Bill) requires thereversion of any unspent appropriations. The department requested the reversion because it isresearching the feasibility of moving the headquarters to a new location.

Pinetop Regional OfficeThe department will install a 5,580 square foot pre-engineered modular building at the PinetopRegional Office to serve as a warehouse and workshop. The space will be used to store andsecure equipment and vehicles. The estimated cost for the facility is $239,900, or $43 per squarefoot, which is reasonable for this type of building. This project was originally part of the scopefor a FY 2001 appropriation to expand the facilities, however, bid prices did not allow theconstruction of this space. An additional $14,000 will be used to purchase a storage system.

The department will also use $50,000 to complete paving a driveway that could not beaccommodated with the FY 2001 appropriation. The project will pave 7,700 square yards at acost of $6.50 per square yard, which reasonable for the proposed paving.

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Tri-State Shooting RangeThe department will develop a shooting range to serve the tri-state area (Arizona, California,Nevada) near Lake Havasu. The $300,000 appropriation will be used to create the rangeinfrastructure including fencing, roadways, parking and utilities; grading and drainage for trap,skeet and sporting clay ranges; and grading, drainage, berm construction, and control buildingfor pistol ranges. JLBC Staff has requested additional information to confirm the reasonablenessof the cost estimates.

An additional $300,000 will be required to complete the project. The facility is planned forconstruction on U.S. Bureau of Land Management lands by Special Use Permit.

RS/JH:jb

STATE OF ARIZONA








SUBJECT: ARIZONA EXPOSITION AND STATE FAIR BOARD – REVIEW OF FY 2004BUILDING RENEWAL ALLOCATION PLAN

Request

The Arizona Exposition and State Fair (AESF) requests Committee review of its FY 2004 BuildingRenewal expenditure plan totaling $947,500.

Recommendation

The Committee has at least the following two options:

1. Favorably review the FY 2004 Building Renewal allocation plan to expend $947,500 for parking lotimprovements. The agency reports that the conditions of the south parking lot and grandstandparking lot pose safety hazards.

2. Hold any expenditures for these projects pending further discussion on the future of the Coliseum.The Coliseum and fairgrounds have recently been discussed by the Legislature as potential candidatesfor asset sales.

Analysis

Laws 1986, Chapter 85 established the Joint Committee on Capital Review and charged it withdeveloping a Building Renewal formula to guide the Legislature in appropriating monies for maintenanceand repair of state buildings. A.R.S. § 41-1252 requires JCCR review of the expenditure plan forBuilding Renewal monies.

Laws 2003, Chapter 261, appropriated $1,198,100 in FY 2004 from the Arizona Exposition and State FairFund to the AESF Capital Outlay Fund for major maintenance and repair of its facilities. The costs of theprojects appear to be consistent with bid estimates for paving projects received by the ArizonaDepartment of Administration. The following chart outlines the expenditures for the FY 2004 projects:

(Continued)

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Project Estimated CostSouth Parking Lot Pulverize Existing Lot Surface & Repave (69,000 Sq. Ft. x $10.85) $ 748,700

Miscellaneous Expenses 37,800Construction Surveying 29,200Construction Inspection & Testing 19,500Re-stripe Parking Lot 5,000

Project Total $ 840,200

Grandstand Parking Lot Remove and Replace Asphalt (8,700 Sq. Ft. x $10.81) $ 94,300Stripping 4,300Surveyors 8,700

Project Total $107,300

RS/JH:jb

STATE OF ARIZONA







FROM: Tony Vidale, Senior Fiscal Analyst

SUBJECT: DEPARTMENT OF CORRECTIONS – REPORT ON STATUS OF 1,400 BEDPRIVATE PRISON CONTRACT

Request

The Chairman has requested that the Arizona Department of Corrections (ADC) report to the Committeeon the status of a contract for the department to purchase 1,400 private prison beds to house Arizonaprison inmates.

Recommendation

This item is for information only and no Committee action is required.

Analysis

Pursuant to A.R.S. § 41-1609, the Arizona Department of Corrections (ADC) shall submit all privateprison contracts to the Office of the Attorney General (AG) for approval. As noted in the attached letter,a contract to house 1,400 Arizona inmates in a new privately operated prison facility has not receivedfinal approval by the AG. Since ADC is operating an overcrowded prison system and the Legislatureapproved additional monies for ADC in FY 2004 to purchase more private prison beds, the Chairman hasrequested that ADC update the Committee on the current timeline for approval of the contract.

RS/TV:jbAttachment

STATE OF ARIZONA




October 29, 2003

The Honorable Terry Goddard Ms. Dora Schriro, DirectorArizona State Attorney General Arizona Department of Corrections1275 West Washington Street 1601 West Jefferson StreetPhoenix, AZ 85007 Phoenix, AZ 85007

Ms. Betsey Bayless, DirectorArizona Department of Administration100 North 15th Avenue, Suite 401Phoenix, AZ 85007

Dear Attorney General Goddard, Directors Schriro and Bayless,

On September 24th, I met with the Arizona Department of Corrections (ADC) to receive an update on thecontract to purchase 1,400 private prison beds to house Arizona prison inmates. At that time, it was myunderstanding that ADC and the private entity were finalizing details of a contract that would then requirefinal approval by the Office of the Attorney General. It is now more than a month since that meeting andit appears we are no further along in the process. Given the severe overcrowding currently occurringwithin ADC, I am very concerned about the impact any further delay could have on public safety.

As you are no doubt aware, the Arizona Legislature provided a total of $7.3 million to ADC in FY 2004to contract for 400 of the 1,400 beds beginning in July 2003. Due to delays in finalizing the contract, Iwas informed that the beds would not be available until November 2003. At our September 24th meeting,the department informed me that the beds would begin to open about 3 to 4 months after final approval bythe Attorney General, that it would be a matter of days before the contract was finalized, and the bedswould be available in January 2004. However, I have now been informed that further contract delaysmay preclude ADC from housing inmates in the new private prison until February 2004 at the earliest.

In recognition of prison overcrowding and legislative intent that these additional private prison beds beprocured as soon as possible, as demonstrated by the additional monies added to ADC’s FY 2004 budgetfor these beds, it is imperative that the contract for the 1,400 private beds be quickly finalized.

It is also my understanding that final resolution of the 1,400 private prison bed contract may requireconsideration by the Joint Committee on Capital Review (JCCR) due to the inclusion of a lease-purchaseagreement. To facilitate a quick resolution of this issue, as chairman of JCCR, I will include the 1,400bed private prison as an agenda item at the next JCCR meeting scheduled for November 6, 2003 and askthat you report to the Committee the status of the contract.

(Continued)

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Accordingly, I respectfully request that a representative from each or your offices appear before theCommittee to explain the contract delays and to give an indication of when a favorable disposition of thisissue will occur.

Thank you very much for your assistance regarding this very important issue.

Respectfully,

______________________________________Senator Robert BurnsChairman, Joint Committee on Capital Review

xc: Representative Russell PearceRichard Stavneak, Director, JLBC

state of arizona joint committee on capital review · jake corey, jlbc staff, presented the...

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